Sterling Retraces to Pre-Election Levels.

The new Conservative Government is set to add a new clause to the Brexit bill to make it illegal for Parliament to extend the transition period pay to December 2020. Currently, there is an option to extend the transition period, if mutually agreed, by up to two years. However, when the Withdrawal Agreement Bill is brought before the House of Commons this week there will be an amendment making any further extension illegal.

There has been criticism of the suggested amendment as many think it increases the chance of the UK leaving the EU without a trade deal. Sterling has been negatively impacted against a basket of major currencies.

The UK unemployment data release later this morning will be viewed with added significance following sterling’s decline.

The Bank of England said yesterday it planned to adjust the rules regarding the capital requirements for UK banks in a move to call them to keep lending in the event of an economic crisis. Although the average amount of capital required would hold broadly unchanged, the BoE said its plans would allow more variance in the capital during the course of a market cycle.

Currently, the majority of UK lenders are required to hold approximately 14% of risk-weighted assets on average. The BoE currently designates 1% of risk-weighted assets as a “counter-cyclical capital buffer” during normal economic times, which can be used to support lending in a downturn. Yesterday the BoE said that it would double this buffer to 2% to take effect by 2020.

Economic Calendar

Expected Previous
09:30 GBP ILO Unemployment Rate (3M) (Oct) 3.9% 3.8%
09:30 GBP Average Earnings (Oct) 3.6% 3.6%
13:30 EUR ECB’s Lane speech Speech -
14:15 USD Industrial Production (Nov) 0.8% -0.8%
19:15 GBP BoE’s Governor Carney Speech Speech -

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